tsx:abx barrick gold corporation sector: materials sell

Analysts: Aleck Boyd, Dario Munoz Poletti,

Bernadette Smith and Sara SpechtWashburn University

Applied Portfolio Management

Report Date: 4/18/2016

Market Cap (mm) $15,980 Annual Dividend $0.14 2‐Yr Beta (S&P 500 Index) 0.39 Barrick Gold Corporation

Return on Capital 9.7% Dividend Yield 1.0% Annualized Alpha 31.7% Compared With:

EPS (ttm) ‐$2.44 Price/Earnings (ttm) ‐5.6 Institutional Ownership 3.4% Newmont Mining Corporation

Current Price $13.72 Economic Value‐Added (ttm) $209 Short Interest (% of Shares) 0.0% Goldcorp Inc.

12‐mo. Target Price $13.61 Free Cash Flow Margin 82.3% Days to Cover Short 0.0 and the S&P 500 Index

Business Description

Total Revenue ‐14.4% Free Cash Flow 5.4%

EBIT ‐33.7% Total Invested Capital ‐17.9%

NOPAT ‐33.7% Total Assets ‐17.9%

Earnings Per Share ‐8.0% Economic Value‐Added ‐59.7%

Dividends Per Share ‐42.8% Market Value‐Added ‐52.2%

2011 2012 2013 2014 2015

49.8% 41.4% 32.2% 23.6% 19.3%

N/A 44.1% 88.9% 39.8% 82.3%

9.9% ‐1.5% ‐57.6% ‐23.1% ‐33.0%

1.1% 2.1% 2.8% 1.8% 1.9%

2011 2012 2013 2014 2015

4.49 (0.54) (10.14) (2.50) (2.44)

0.51 0.75 0.50 0.20 0.14

4.72 5.96 3.95 2.07 1.49

N/A 6.34 10.90 3.50 6.38

Datasource: Capital IQ

NOPAT

Free Cash Flow

Earnings Yield

Dividend Yield

Per Share Metrics

Earnings

Dividends

Free Cash Flow Margin

Barrick Gold Corporation produces and sells gold and copper. The company is

also involved in exploration and mine development activities. It conducts

mining, development and exploration, and other activities in various countries,

including the United States, Canada, Australia, Argentina, Chile, Peru, the

Dominican Republic, Papua New Guinea, Tanzania, Zambia, and Saudi Arabia.

Its principal properties include Cortez, Goldstrike, Pueblo Viejo, Lagunas Norte,

and Veladero. As of December 31, 2014, the company had proven and

probable mineral reserves of 91.1 million ounces of gold and 11.7 billion

pounds of copper. Barrick Gold Corporation was founded in 1983 and is

headquartered in Toronto, Canada.

Investment Thesis

ANNUALIZED 3‐YEAR CAGR

Margins and Yields

Operating Margin

TSX:ABX Barrick Gold Corporation Sector: Materials SELL

‐50%‐40%‐30%‐20%‐10%0%10%20%30%40%50%

TSX:ABX ^SPX

‐60%

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0%

20%

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60%TSX:ABX NEM TSX:G

0

1

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2012 2013 2014 2015

Price/Earnings Price/Free Cash Flow

$0

$1,000

$2,000

$3,000

$4,000

$5,000

$6,000

$7,000

$8,000

2011 2012 2013 2014 2015

EBIT Net Operating Profit After Tax

$0

$5,000

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$25,000

$0

$500

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$2,000

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$3,500

2011 2012 2013 2014 2015

Economic Value‐Added Market Valued‐Added

‐70%‐60%‐50%‐40%‐30%‐20%‐10%0%10%20%30%

2011 2012 2013 2014 2015

ROA ROE ROIC

Barrick Gold Corporation TSX:ABX Sector Materials Newmont Mining Corporation NEM Sector Materials

2011 2012 2013 2014 2015 2011 2012 2013 2014 2015

Total Revenue 14,236 14,394 12,527 10,239 9,029 Total Revenue 10,358 9,964 8,414 7,292 7,729

Cost of Goods Sold 6,206 7,201 7,281 6,708 6,587 Cost of Goods Sold 4,026 4,403 4,425 4,121 4,354

Gross Profit 8,030 7,193 5,246 3,531 2,442 Gross Profit 6,332 5,561 3,989 3,171 3,375

SG&A Expense 513 845 1,038 744 559 SG&A Expense 548 568 450 350 339

R&D Expense 0 0 0 0 0 R&D Expense 373 348 222 161 133

Dep. & Amort. 0 0 0 0 0 Dep. & Amort. 1,036 1,031 1,120 1,080 1,121

Other Oper. Exp. 429 384 170 374 143 Other Oper. Exp. 225 379 251 165 168

Operating Income 7,088 5,964 4,038 2,413 1,740 Operating Income 4,150 3,235 1,946 1,415 1,614

Interest Expense (150) (121) (499) (722) (744) Interest Expense (244) (249) (303) (361) (325)

Other Non‐Oper. Exp. (42) 29 (192) (138) (135) Other Non‐Oper. Exp. 77 113 128 48 0

EBT ex‐Unusuals 6,909 5,883 3,352 1,564 874 EBT ex‐Unusuals 4,028 3,153 1,806 1,102 1,293

Total Unusual Exp. (85) (6,349) (12,819) (4,217) (4,018) Total Unusual Exp. (2,207) (90) (5,417) (600) (372)

Earnings Before Tax 6,824 (466) (9,467) (2,653) (3,144) Earnings Before Tax 1,821 3,063 (3,611) 502 921

Income Tax Expense 2,287 (102) 630 306 (31) Income Tax Expense 713 876 (755) 133 644

Net Income 4,484 (538) (10,366) (2,907) (2,838) Net Income 366 1,802 (2,534) 508 220

Earnings per Share $4.49 ‐$0.54 ‐$10.14 ‐$2.50 ‐$2.44 Earnings per Share $0.74 $3.63 ‐$5.09 $1.02 $0.43

Dividends per Share $0.51 $0.75 $0.50 $0.20 $0.14 Dividends per Share $1.00 $1.40 $1.23 $0.23 $0.10

Effective Tax Rate 33.51% 0.00% 0.00% 0.00% 0.00% Effective Tax Rate 39.15% 28.60% 0.00% 26.49% 69.92%

Total Common Shares 999 1,001 1,022 1,165 1,165 Total Common Shares 494 496 498 499 516

Year‐end Stock Price $45.40 $34.93 $17.61 $10.81 $7.38 Year‐end Stock Price $60.01 $46.44 $23.03 $18.90 $17.99996 997 998 999 1000 996 997 998 999 1000

Assets 2011 2012 2013 2014 2015 Assets 2011 2012 2013 2014 2015

Cash and Equivalents 2,745 2,097 2,404 2,699 2,455 Cash and Equivalents 1,760 1,561 1,555 2,403 2,782

Short‐Term Investments 0 0 0 0 0 Short‐Term Investments 94 86 78 73 19

Total Cash & ST Invest. 2,745 2,097 2,404 2,699 2,455 Total Cash & ST Invest. 1,854 1,647 1,633 2,476 2,801

Total Receivables 620 675 647 626 454 Total Receivables 632 970 612 600 445

Inventory 2,498 2,585 2,679 2,722 1,717 Inventory 2,181 2,765 2,201 1,972 1,606

Prepaid Expenses 123 239 81 62 46 Prepaid Expenses 93 213 157 147 112

Total Current Assets 6,545 5,757 6,212 6,150 5,468 Total Current Assets 5,388 5,945 4,889 5,439 4,983

Net PPE 28,979 29,277 21,688 19,193 14,434 Net PPE 15,428 17,362 13,699 13,136 13,917

Total Assets 48,884 47,478 37,448 33,879 26,308 Total Assets 26,111 29,650 24,607 24,916 25,182

Liabilities and Equity Liabilities and Equity

Accounts Payable 963 1,020 1,058 974 736 Accounts Payable 561 657 478 406 396

Accrued Expenses 1,161 1,280 1,126 694 443 Accrued Expenses 1,552 2,009 1,330 1,183 551

Short‐Term Debt 0 0 0 0 0 Short‐Term Debt 0 0 0 0 0

Total Current Liab. 2,911 4,417 2,884 2,487 1,847 Total Current Liab. 3,940 3,141 2,740 2,198 1,416

Long‐Term Debt 12,998 11,948 12,699 12,465 9,653 Long‐Term Debt 3,623 6,288 6,145 6,480 6,070

Total Liabilities 23,330 22,842 21,447 21,017 16,853 Total Liabilities 10,340 12,702 11,698 11,827 10,890

Preferred Equity 0 0 0 0 0 Preferred Equity 0 0 0 0 0

Common Stock & APIC 18,168 18,202 21,145 21,147 21,152 Common Stock & APIC 9,192 9,117 9,327 9,510 10,274

Retained Earnings 4,562 3,269 (7,581) (10,739) (13,642) Retained Earnings 3,052 4,166 848 1,242 1,410

Treasury Stock 0 0 0 0 0 Treasury Stock 0 0 0 0 0

Total Common Equity 23,363 21,972 13,533 10,247 7,178 Total Common Equity 12,896 13,773 9,993 10,274 11,350

Total Equity 25,554 24,636 16,001 12,862 9,455 Total Equity 15,771 16,948 12,909 13,089 14,292

Total Liab. and Equity 48,884 47,478 37,448 33,879 26,308 Total Liab. and Equity 26,111 29,650 24,607 24,916 25,182

Income Statement Highlights

Balance Sheet Highlights

Income Statement Highlights

Balance Sheet Highlights

1. Margins and Profitability ABX, of 17 Copyright Robert A. Weigand, Ph.D., 2016

TSX:ABX Barrick Gold Corporation NEM Newmont Mining Corporation

Profit Margins 2011 2012 2013 2014 2015 Profit Margins 2011 2012 2013 2014 2015

Gross Profit Margin 56.4% 50.0% 41.9% 34.5% 27.0% Gross Profit Margin 61.1% 55.8% 47.4% 43.5% 43.7%

Operating Profit Margin 49.8% 41.4% 32.2% 23.6% 19.3% Operating Profit Margin 40.1% 32.5% 23.1% 19.4% 20.9%

Net Profit Margin 31.5% ‐3.7% ‐82.7% ‐28.4% ‐31.4% Net Profit Margin 3.5% 18.1% ‐30.1% 7.0% 2.8%

Free Cash Flow Margin N/A 44.1% 88.9% 39.8% 82.3% Free Cash Flow Margin N/A 2.1% 67.6% 10.7% ‐9.6%

0%

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2011 2012 2013 2014 2015

Gross Profit Margin Operating Profit Margin

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2011 2012 2013 2014 2015


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2011 2012 2013 2014 2015

Gross Profit Margin TSX:ABX NEM

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2011 2012 2013 2014 2015

Operating Profit Margin TSX:ABX NEM

‐100.0%

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0.0%

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2011 2012 2013 2014 2015

Net Profit Margin TSX:ABX NEM

Gross Profit Margin: Gross profit margin shows gross profit as a percentage of revenue. Barrick Gold's gross profit is in a downtrend from 56.4% in 2011 to 27.0% in 2015. Newmont's gross profit margin is in also in a downtrend from 61.1% in 2011 to 43.7% in 2015, and outperforming Barrick Gold each year. Newmont's outperformance of Barrick Gold every year, indicating that a greater percentage of revenue is available to flow toward bottom line profits, free cash flow that supports the firms intrinsic value, and back to investors in the form of dividends.

Operating Profit Margin: Operating profit margin illustrates operating profit as a percentage of revenue. Barrick Gold's operating profit margin is in a downtrend from 49.8% in 2011 to 19.3% in 2015. Newmont's operating profit margin is in a downtrend from 2011 to 2014, before a slight increase in 2015 and outperforming Barrick Gold in 2015. The decrease in Barrick's operating profit margin signals that there is less cash available to flow toward bottom line profits, free cash flow that supports the firm's intrinsic value, and back to the investors in the form of dividends.

Net Profit Margin: Net profit margin expresses net income as a percentage of total revenues. Barrick Gold shows a downward trend in Net Profit Margin from 31.5% in 2011 to ‐31.4% in 2015, where revenues are growing slower than net income. Newmont's Net Profit Margin shows a downtrend from 67.6% in 2013 to ‐9.6% in 2015. Newmont outperforms Barrick from 2012 to 2015. Low and negative Net Profit Margins for both companies indicate profits are not flowing to the bottom line efficiently.

Conclusion: Overall, Barrick's gross profit margin, operating profit margin, and net profit margin are in a recent downtrend. Growing gross, operating, and net profit margins indicate that gross profit, operating profit, and net profit are growing faster than revenue.

‐20.0%

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2012 2013 2014 2015

Free Cash Flow Margin TSX:ABX NEM



Profitability Ratios 2011 2012 2013 2014 2015 Profitability Ratios 2011 2012 2013 2014 2015

Net Profit Margin 31.5% ‐3.7% ‐82.7% ‐28.4% ‐31.4% Net Profit Margin 3.5% 18.1% ‐30.1% 7.0% 2.8%

× Total Asset Turnover 0.3 0.3 0.3 0.3 0.3 × Total Asset Turnover 0.4 0.3 0.3 0.3 0.3

= Return on Assets 9.2% ‐1.1% ‐27.7% ‐8.6% ‐10.8% = Return on Assets 1.4% 6.1% ‐10.3% 2.0% 0.9%

× Equity Multiplier 1.9 1.9 2.3 2.6 2.8 × Equity Multiplier 1.7 1.7 1.9 1.9 1.8

= Return on Equity 17.5% ‐2.2% ‐64.8% ‐22.6% ‐30.0% = Return on Equity 2.3% 10.6% ‐19.6% 3.9% 1.5%

‐80%

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40%

2011 2012 2013 2014 2015

Return on Assets Return on Equity

‐25%

‐20%

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‐10%

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0%

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15%

2011 2012 2013 2014 2015

Return on Assets Return on Equity

0.00.10.10.20.20.30.30.40.40.5

2011 2012 2013 2014 2015

Total Asset Turnover TSX:ABX NEM

‐30.0%‐25.0%‐20.0%‐15.0%‐10.0%‐5.0%0.0%5.0%10.0%15.0%

2011 2012 2013 2014 2015

Return on Assets TSX:ABX NEM

‐80.0%

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0.0%

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2011 2012 2013 2014 2015

Return on Equity TSX:ABX NEM

Total Asset Turnover: The total asset turnover is the percentage of revenue that is generated by total assets. Barrick's total asset turnover is holding steady around 0.3 from 2011 to 2015. Newmont is in a similar pattern, and remains steady around 0.3 from 2012 through 2015. Newmont is above Barrick from 2014 to 2015, as well as 2013. The steady trend signals that both companies are generating roughly the same level of revenues per dollar of assets each year.

Return on Assets: Return on assets is net income as a percentage of assets. Barrick's ROA is in a downtrend from 9.2% in 2011 to ‐10.8% in 2015. This is due to fluctuations in the net profit margin while total asset turnover remains steady. Newmont's ROA shows a downtrend from 6.1% in 2012 to0.93% in 2015, with the exception of ‐10.3% in 2013. While both companies are in a relative uptrend, Newmont is outperforming Barrick in 2from 2012 to 2015. Newmont's performance above Barrick, shows that Newmont is generating more net income per dollar of assets.

Return on Equity: Return on equity is net income as a percentage of shareholder's equity. Barrick's ROE is in a downtrend from 17.5% in 2011 to ‐30.0% in 2015 due to a decrease in net profit margin affecting the ROA, while total asset turnover stays steady, and the equity multiplier increased. Newmont's ROE shows a downtrend from 10.6% in 2012 to 1.5% in 2015, with the exception of a negative 19.6% in 2013, and outperforms Barrick from 2012 to 2015. Newmont's outperformance of Barrick Gold from 2012 to 2015 illustrates that Barrick is expressing less dollars of profit relative to the capital contributions by shareholders.

Conclusion: Overall, Barrick Gold's return on assets and return on equity are in a downtrend from 2011 to 2015 due to fluctuations in net income and the equity multiplier. With a decreasing net profit margin and steady total asset turnover, the decreases in ROA and ROE signals that Barrick Gold is generating less net income per dollar of assets and equity.

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2011 2012 2013 2014 2015

Equity Multiplier TSX:ABX NEM



Multiples and Yields 2011 2012 2013 2014 2015 Multiples and Yields 2011 2012 2013 2014 2015

Price/Earnings 10.1 N/A N/A N/A N/A Price/Earnings 81.0 12.8 N/A 18.6 42.2

Price/Book 0.9 0.7 0.5 0.4 0.3 Price/Book 1.1 0.8 0.5 0.4 0.4

Price/Free Cash Flow N/A 5.5 1.6 3.1 1.2 Price/Free Cash Flow N/A 107.7 2.0 12.1 N/A

Earnings Yield 9.9% ‐1.5% ‐57.6% ‐23.1% ‐33.0% Earnings Yield 1.2% 7.8% ‐22.1% 5.4% 2.4%

Dividend Yield 1.1% 2.1% 2.8% 1.8% 1.9% Dividend Yield 1.7% 3.0% 5.3% 1.2% 0.6%

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2012 2013 2014 2015


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2012 2013 2014 2015

Earnings Yield Dividend Yield

‐70.0%‐60.0%‐50.0%‐40.0%‐30.0%‐20.0%‐10.0%0.0%

10.0%20.0%

2012 2013 2014 2015

Earnings Yield TSX:ABX NEM

Price to earnings ratio: The price to earnings ratio expresses the stock price as a multiple of its earnings over the past 12 trailing months. Barick Gold's P/E ratio is nonexistant, through 2012 to 2015. In 2011 when they had possitive earnings ABX was at 10.1. Newmont Minning's P/E ratio is also volitile from 81 in 2011 to 112.8 in 2012. In 2013 NEM saw a nonexistent PE ratio as well. The lack of P/E ratio can be attributed to negative earnings per share indicating a strong concern for possible overvaluation.Earnings yield: The earnings yield, the reciprocal of its P/E ratio, expresses EPS as a percentage of the stock price. Barick Gold's earnings yield is volitile from 9.9% in 2011 and bottoming at ‐57.6% in 2013 as the stock price grows faster than its earnings. Newmont Minning's earnings yield is volitile ranging from ‐21.1% in 2013 to 7.8% in 2011 as the stock price grows faster than earnings. ABX's and NEM's lower earnings yield indicate that the market is pricing their stock more expensive relative to its earnings. Dividend yield: Dividend yield expresses the annual dividend per share as a percentage of the stock price. Barick Gold's dividend yield is from 1.1% in 2011 to 1.9% in 2015, the small decrease shows that the market is pricing the stock cheaper relative to its dividend per share as dividends grows faster than the stock price. The low dividend yield, over all years, ranging from 1.1%‐2.8% for ABX shows a weak commitment to paying dividends. NEM's dividend yield is volitile ranging from .6%‐5.3%. Both companies lack the history of strong dividend payers.Conclusion: Barick Gold's P/E ratio is below the reasonable range of 12‐18 and negative in almost all years where earnings decline faster than the stock price indicating concerns about a possible overvaluation. ABX's dividend yield is low at approximately 1.5% on average which is below our benchmark of 2% for strong dividend payers.

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Price to Earnings TSX:ABX NEM

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Price to Book TSX:ABX NEM

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Price to Free Cash Flow TSX:ABX NEM

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Dividend Yield TSX:ABX NEM

2. Relative Valuation and Debt ABX, of 17 Copyright Robert A. Weigand, Ph.D., 2016


Liquidity and Debt 2011 2012 2013 2014 2015 Liquidity and Debt 2011 2012 2013 2014 2015

Current Ratio 2.25 1.30 2.15 2.47 2.96 Current Ratio 1.37 1.89 1.78 2.47 3.52

Quick Ratio 1.39 0.72 1.23 1.38 2.03 Quick Ratio 0.81 1.01 0.98 1.58 2.38

Days Sales Outstanding 15.90 17.12 18.85 22.32 18.35 Days Sales Outstanding 22.27 35.53 26.55 30.03 21.02

Inventory Turnover 5.70 5.57 4.68 3.76 5.26 Inventory Turnover 4.75 3.60 3.82 3.70 4.81

Total Debt to Assets 26.6% 25.2% 33.9% 36.8% 36.7% Total Debt to Assets 13.9% 21.2% 25.0% 26.0% 24.1%

Long‐Term Debt to Equity 55.6% 54.4% 93.8% 121.6% 134.5% Long‐Term Debt to Equity 28.1% 45.7% 61.5% 63.1% 53.5%

Times Interest Earned 47.25 49.29 8.09 3.34 2.34 Times Interest Earned 17.01 12.99 6.42 3.92 4.97

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2011 2012 2013 2014 2015

Current Ratio Quick Ratio

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Current Ratio TSX:ABX NEM

Current Ratio: The current ratio measures the firm’s ability to meet short term obligations. Barick Gold's current ratio has been volitile from 2012 to 2015 ranging from 1.3 to 2.96. Newmont Minning's has been in an uptrend from 2013 to 2015, and is higher than ABX in 2015. ABX is above 1.0 from in all years meaning that the company is able to meet their short term obligations historically..Total Debt to Assets: Total debt to assets is the percentage of total debt to total assets. Barrick Gold's total debt to assets have been increasing from 25.2% in 2012 to 36.7% in 2015, having a higher ratio than Newmont's from 2011 to 2015.Barick Gold's higher ratio expresses that ABX is incurring more debt to finance the acquired assets.Conclusion: Both ABX and NEM are maintaining a current ratio above or arround 1.0 which illustrates that both companies are able to meet their short term obligations in 2015. ABX's higher total debt to assets can be attributed to their higher debt to fund projects.

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Total Debt to Assets TSX:ABX NEM

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Days Sales Outstanding Inventory Turnover

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Days Sales Outstanding Inventory Turnover

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2011 2012 2013 2014 2015

Total Debt to Assets Long-Term Debt to Equity

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2011 2012 2013 2014 2015

Total Debt to Assets Long-Term Debt to Equity

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Long-Term Debt to Equity TSX:ABX NEM

2. Relative Valuation and Debt ABX, of 17 Copyright Robert A. Weigand, Ph.D., 2016


Total Invested Capital 2011 2012 2013 2014 2015 Total Invested Capital 2011 2012 2013 2014 2015

Total Cash and ST Investments 2,745 2,097 2,404 2,699 2,455 Total Cash and ST Investments 1,854 1,647 1,633 2,476 2,801

+ Receivables 620 675 647 626 454 + Receivables 632 970 612 600 445

+ Inventory 2,498 2,585 2,679 2,722 1,717 + Inventory 2,181 2,765 2,201 1,972 1,606

− Accounts Payable 963 1,020 1,058 974 736 − Accounts Payable 561 657 478 406 396

− Accrued Expenses 1,161 1,280 1,126 694 443 − Accrued Expenses 1,552 2,009 1,330 1,183 551

= Net Oper. Working Capital 3,739 3,057 3,546 4,379 3,447 = Net Oper. Working Capital 2,554 2,716 2,638 3,459 3,905

+ Net Property, Plant & Equip. 28,979 29,277 21,688 19,193 14,434 + Net Property, Plant & Equip. 15,428 17,362 13,699 13,136 13,917

= Total Invested Capital 32,718 32,334 25,234 23,572 17,881 = Total Invested Capital 17,982 20,078 16,337 16,595 17,822

÷ Total Weighted Shares 999 1,001 1,022 1,165 1,165 ÷ Total Weighted Shares 494 496 498 499 516

= Total Invested Capital/Share $32.75 $32.30 $24.69 $20.23 $15.35 = Total Invested Capital/Share $36.40 $40.48 $32.81 $33.26 $34.54


NOPAT and Free Cash Flow 2011 2012 2013 2014 2015 NOPAT and Free Cash Flow 2011 2012 2013 2014 2015

Operating Income (EBIT) 7,088 5,964 4,038 2,413 1,740 Operating Income (EBIT) 4,150 3,235 1,946 1,415 1,614

× (1−Effective Tax Rate) 33.5% 0.0% 0.0% 0.0% 0.0% × (1−Effective Tax Rate) 39.2% 28.6% 0.0% 26.5% 69.9%

= Net Oper. Profit After Tax 4,713 5,964 4,038 2,413 1,740 = Net Oper. Profit After Tax 2,525 2,310 1,946 1,040 485

− ∆ Total Invested Capital N/A (384) (7,100) (1,662) (5,691) − ∆ Total Invested Capital N/A 2,096 (3,741) 258 1,227

= Free Cash Flow N/A 6,348 11,138 4,075 7,431 = Free Cash Flow N/A 214 5,687 782 (742)

NOPAT per Share $4.72 $5.96 $3.95 $2.07 $1.49 NOPAT per Share $5.11 $4.66 $3.91 $2.08 $0.94

Free Cash Flow per Share N/A $6.34 $10.90 $3.50 $6.38 Free Cash Flow per Share N/A $0.43 $11.42 $1.57 ($1.44)

$0

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$35,000

2011 2012 2013 2014 2015

Net Property, Plant & Equip. Total Invested Capital

$0

$5,000

$10,000

$15,000

$20,000

$25,000

2011 2012 2013 2014 2015

Net Property, Plant & Equip. Total Invested Capital

$0.00$5.00

$10.00$15.00$20.00$25.00$30.00$35.00$40.00$45.00

2011 2012 2013 2014 2015

Total Invested Capital per Share TSX:ABX NEM

$0

$2,000

$4,000

$6,000

$8,000

$10,000

$12,000

2012 2013 2014 2015

Net Operating Profit After Tax Free Cash Flow

$0.00

$1.00

$2.00

$3.00

$4.00

$5.00

$6.00

$7.00

2012 2013 2014 2015

NOPAT per Share TSX:ABX NEM

($2,000)($1,000)

$0$1,000$2,000$3,000$4,000$5,000$6,000$7,000

2012 2013 2014 2015

Net Operating Profit After Tax Free Cash Flow

Total invested capital: ABX's total invested capital is showing an downwardtrend from 32,718 in 2011 to 17,881 in 2015. ABX's total invested capital exceeds NEM's every year from 2011 to 2015, where ABX had a substantial decrease in Net PP&E from $28,979 in 2011 to $14,434 in 2015 exceeding NEM’s Net PP&E that decreases from $15,428 in 2011 to $13,917 in 2015.NOPAT/share: ABX's NOPAT/share has been in a downward trend from $5.96 in 2012 to $1.49 in 2015 due to a lower EBIT. NEM's NOPAT/share decreases from $5.11 in 2011 to $0.94 2015. The decrease in NOPAT/share for ABX can be attributed to lower revenues and decreasing EBIT, while NEM has a higher tax rates every year showing ABX's tax advantage.FCF/Share: ABX's FCF/share shows an increase from $6.34 2012 to $10.90 in 2013 where the change in total invested capital is declining faster than NOPAT, but FCF/share decreases to $6.38 in 2015, where ABX experience decrease in NOPAT and at the same time a negative change in total invested capital. NEM's free cash flow/share increases from $0.43 in 2012 to $11.42 in 2013, but finally decreases to ‐$1.44 in 2015 where the change in total invested capital exceeds NOPAT. ABX's FCF/share is outperforming NEM every year except for 2013. Even with the decrease in NOPAT, ABX's 2015 increase in free cash flow/share signals that there is more free NOPAT to pay out to investors than NEM because less has been spent on acquiring new assets and since FCF/share is the major driver of per share valuation ABX earns a win in this category.

3. Value Creation and DCF Model ABX, of 17 Copyright Robert A. Weigand, Ph.D., 2016


Cost of Capital 2015 Weight % Cost Weighted % Cost of Capital 2015 Weight % Cost Weighted %

Equity Capitalization $8,598 47.1% 13.033% 6.140% Equity Capitalization $9,283 60.5% 2.542% 1.537%

+ Total Debt $9,653 52.9% 5.000% 2.423% + Total Debt $6,070 39.5% 5.000% 0.595%

+ Preferred Stock $0 0.0% 0.000% 0.000% + Preferred Stock $0 0.0% 0.000% 0.000%

= Value of All Securities $18,251 100.0% = Value of All Securities $15,353 100.0%

Effective Tax Rate 8.38% Alternative RF Rate: Effective Tax Rate 69.92% Alternative RF Rate:

Risk‐Free Rate 1.924% 1.924% Risk‐Free Rate 1.924% 1.924%

Beta (5‐Yr) 1.587 Alternative Beta: 1.58704 Beta (5‐Yr) 0.088 Alternative Beta: 0.08825

Market Risk Premium 7.0% Market Risk Premium 7.0%

CAPM Cost of Equity 13.033% CAPM Cost of Equity 2.542%

Weighted Average Cost of Capital: 8.563% Weighted Average Cost of Capital: 2.131%

8.563% 8.563% 8.563% 8.563% 8.563%


ROIC, EVA and MVA 2011 2012 2013 2014 2015 ROIC, EVA and MVA 2011 2012 2013 2014 2015

Return on Invested Capital 14.4% 18.4% 16.0% 10.2% 9.7% Return on Invested Capital 14.0% 11.5% 11.9% 6.3% 2.7%

Economic Value‐Added 1,911 3,195 1,877 395 209 Economic Value‐Added 2,142 1,882 1,598 686 106

Market Valued‐Added 21,988 12,996 4,466 2,348 1,420 Market Valued‐Added 16,749 9,261 1,476 ‐843 ‐2,067

EVA per Share $1.91 $3.19 $1.84 $0.34 $0.18 EVA per Share $4.34 $3.79 $3.21 $1.38 $0.20

MVA per Share $22.01 $12.98 $4.37 $2.02 $1.22 MVA per Share $33.90 $18.67 $2.96 ($1.69) ($4.01)

$0.00

$1.00

$2.00

$3.00

$4.00

$5.00

2011 2012 2013 2014 2015

EVA per Share TSX:ABX NEM

0

5,000

10,000

15,000

20,000

25,000

0

500

1,000

1,500

2,000

2,500

3,000

3,500

2011 2012 2013 2014 2015

Economic Value-Added Market Valued-Added

‐5,000

0

5,000

10,000

15,000

20,000

0

500

1,000

1,500

2,000

2,500

2011 2012 2013 2014 2015

Economic Value-Added Market Valued-Added

ROIC: Return on invested capital measures how much NOPAT a firm generates per dollar of invested capital. ABX experiences an downward trend in ROIC from 14.4% in 2011 to 9.7% in 2015. NEM's ROIC decreases from 14% in 2011 to 2.7% in 2015, ABX outperforms NEM from 2011 to 2015 generating more NOPAT per dollar of total invested capital. abx is experiencing a decrease in how much NOPAT has been generated per dollar of invested capital. Even with a decrease, ABX's ROIC beats the WACC from 2011 to 2015 meaning ABX is still in a position to generate value.

EVA/share: EVA/share measures how much economic value a firm has created on a year‐by‐year basis per share. ABX's EVA/share decreases from $1.91 in 2011 to $0.18 in 2015, showing that the NOPAT ABX generates is decreasing faster than the cost of capital. NEM's EVA per share is on a downward trend from $4.34 to $0.20, signaling less economic profit is being created on a per share basis. To conclude, even with NEM's decreasing EVA/share where less economic profit has been created due to a lower levels of NOPAT, NEM is still outperforming ABX in this category from 2011 to 2015.Conclusion: With a WACC of 8.56%, a decrease in total invested capital; ABX's EVA/share decreases from $3.19 in 2012 to $.18 2015 showing how much economic profit was reduce in 2015. The reduction in value creation is confirmed by the ROIC‐WACC spread where ABX's ROIC decrease from 14.4% in 2011 to 9.7% bearly above the 8.56% WACC.

0.0%

5.0%

10.0%

15.0%

20.0%

2011 2012 2013 2014 2015

Return on Invested Capital TSX:ABX NEM

‐80%

‐60%

‐40%

‐20%

0%

20%

40%

2011 2012 2013 2014 2015

Return on Invested Capital Return on Equity

‐25%‐20%‐15%‐10%‐5%0%5%

10%15%20%

2011 2012 2013 2014 2015

Return on Invested Capital Return on Equity


Long‐Term Growth Rate: Long‐Term Growth Rate:

TSX:ABX Barrick Gold Corporation 0.0% NEM Newmont Mining Corporation

Intrinsic Value Model 2011 2012 2013 2014 2015 Intrinsic Value Model 2011 2012 2013 2014 2015

PV of Future FCFs 86,306 87,349 83,690 86,781 86,781 PV of Future FCFs ‐26,264 ‐27,038 ‐33,301 ‐34,793 ‐34,793

+ Value of Non‐Oper. Assets 2,745 2,097 2,404 2,699 2,455 + Value of Non‐Oper. Assets 1,854 1,647 1,633 2,476 2,801

= Total Intrinsic Firm Value 89,051 89,446 86,094 89,480 89,236 = Total Intrinsic Firm Value ‐24,410 ‐25,391 ‐31,668 ‐32,317 ‐31,992

− Total Debt 12,998 11,948 12,699 12,465 9,653 − Total Debt 3,623 6,288 6,145 6,480 6,070

= Intrinsic Value of Equity 76,053 77,498 73,395 77,015 79,583 = Intrinsic Value of Equity ‐28,033 ‐31,679 ‐37,813 ‐38,797 ‐38,062

÷ Total Weighted Shares 999 1,001 1,022 1,165 1,165 ÷ Total Weighted Shares 494 496 498 499 516

= Per Share Intrinsic Value $76.13 $77.42 $71.82 $66.11 $68.31 = Per Share Intrinsic Value ‐$56.75 ‐$63.87 ‐$75.93 ‐$77.75 ‐$73.76

vs. Year‐End Stock Price $45.40 $34.93 $17.61 $10.81 $7.38 vs. Year‐End Stock Price $60.01 $46.44 $23.03 $18.90 $17.99

Over (Under) Valuation/Share ($30.73) ($42.49) ($54.20) ($55.30) ($60.93) Over (Under) Valuation/Share $116.76 $110.31 $98.96 $96.65 $91.75

% Over (Under) Valued ‐40.4% ‐54.9% ‐75.5% ‐83.6% ‐89.2% % Over (Under) Valued ‐205.7% ‐172.7% ‐130.3% ‐124.3% ‐124.4%

$0$10$20$30$40$50$60$70$80$90

2011 2012 2013 2014 2015

Year-End Stock Price Per Share Intrinsic Value

‐100%

‐80%

‐60%

‐40%

‐20%

0%

($70)

($60)

($50)

($40)

($30)

($20)

($10)

$0

2011 2012 2013 2014 2015

$ Over (Under) Valued % Over (Under) Valued

‐$100‐$80‐$60‐$40‐$20$0

$20$40$60$80

2011 2012 2013 2014 2015

Year-End Stock Price Per Share Intrinsic Value

‐250%

‐200%

‐150%

‐100%

‐50%

0%

$0

$20

$40

$60

$80

$100

$120

$140

2011 2012 2013 2014 2015


‐$10‐$5$0$5

$10$15$20$25$30$35$40

2011 2012 2013 2014 2015

MVA per Share TSX:ABX NEM

MVA/share: MVA/share measures value creation over the entire life time of the firm on a per share basis. ABX's MVA/share is in a downward trend from $22.01 in 2011 to $1.22 in 2015. NEM is also in a downward trend from $33.90 in 2011 to ‐$4.01 in 2015. ABX has a higher MVA/share than NEM, expressing a higher value of capital contributions to the firm by shareholders. Both firms are in a downward trend showing how genuine value creation decreases on a per share basis from 2011 to 2015.ROIC vs. WACC: ABX's ROIC is on a decreasing trend which is closing the gap between the ROIC and WACC, that can be attributed to the declinig NOPAT faster than total invested capital. The diminishing gap between ROIC and WACC signals that the firm is decreasing its ability to generate economic profit on its investments, where in 2015 reach it's lowest point at 9.7%, but ABX's ROIC is still above the WACC showing that is still able to generate economic profit by a minimal amount.Conclusion: ABX's MVA per share increase expresses how genuine value creation is declines in 2015. NOPAT decreasing faster than total invested capital in 2015 caused a lower return on the invested capital that decreased the ROIC‐WACC spread showing a decrease in ABX's ability to generate economic profit.

0%

5%

10%

15%

20%

2011 2012 2013 2014 2015

Return on Invested Capital WACC



Piotroski Financial Fitness Scorecard 2012 2013 2014 2015 Piotroski Financial Fitness Scorecard 2012 2013 2014 2015

Positive Net Income 0 0 0 0 Positive Net Income 1 0 1 1

Positive Free Cash Flow 1 1 1 1 Positive Free Cash Flow 1 1 1 0

Growing ROA (% change NI > % change TA) 0 0 1 0 Growing ROA (% change NI > % change TA) 1 0 1 0

Earnings Quality (Operating Income > Net Income) 1 1 1 1 Earnings Quality (Operating Income > Net Income) 1 1 1 1

Total Assets Growing Faster Than Total Liabilities 0 0 0 0 Total Assets Growing Faster Than Total Liabilities 0 0 1 1

Increasing Liquidity (Current Ratio) 0 1 1 1 Increasing Liquidity (Current Ratio) 1 0 1 1

% Change Shares Outstanding < +2.0% 1 0 0 1 % Change Shares Outstanding (Diluted) < +2.0% 1 1 1 0

Expanding Operating Margin 0 0 0 0 Expanding Operating Margin 0 0 0 1

Asset Turnover (% change sales > % change assets) 1 1 0 1 Asset Turnover (% change sales > % change assets) 0 1 0 1

Total Liabilities to Operating Cash Flow (EBIT) < 4.0 1 0 0 0 Total Liabilities to Operating Cash Flow (EBIT) < 4.0 1 0 0 0

Piotroski Score (max = 10) 5 4 4 5 Piotroski Score (max = 10) 7 4 7 6


Altman Probability of Bankruptcy Z‐Score 2012 2013 2014 2015 Altman Probability of Bankruptcy Z‐Score 2012 2013 2014 2015

(Current Assets‐Current Liabilities)/Total Assets 0.0339 0.1066 0.1297 0.1652 ## (Current Assets‐Current Liabilities)/Total Assets 0.1135 0.1048 0.1561 0.1700

Retained Earnings/Total Assets 0.0826 ‐0.2429 ‐0.3804 ‐0.6223 ## Retained Earnings/Total Assets 0.1686 0.0414 0.0598 0.0672

Earnings Before Interest & Tax/Total Assets 0.4145 0.3558 0.2350 0.2183 ## Earnings Before Interest & Tax/Total Assets 0.3601 0.2610 0.1874 0.2115

Market Value Equity/Total Liabilities 0.9185 0.5035 0.3596 0.3061 ## Market Value Equity/Total Liabilities 1.0881 0.5883 0.4785 0.5115

Sales/Total Assets 0.3029 0.3342 0.3019 0.3429 ## Sales/Total Assets 0.3357 0.3416 0.2924 0.3066

Altman Score 1.75 1.06 0.65 0.41 Altman Score 2.07 1.34 1.17 1.27

Altman Z‐Score Scale: Safe Zone = Z > 2.9, Grey Zone = 1.23 < Z < 2.9, Distress Zone = Z < 1.23 Altman Z‐Score Scale: Safe Zone = Z > 2.9, Grey Zone = 1.23 < Z < 2.9, Distress Zone = Z < 1.23


31‐Dec‐11 31‐Dec‐12 31‐Dec‐13 31‐Dec‐14 31‐Dec‐15

Barrick Gold Corporation TSX:ABX Materials Report Date:

Average

2011 2012 2013 2014 2015 2011 ‐ 2015 2016E 2017E 2018E 2019E 2020E

Total Revenue 14,236 14,394 12,527 10,239 9,029 Total Revenue 7,765 7,610 7,153 6,795 6,795

% growth N/A 1.1% ‐13.0% ‐18.3% ‐11.8% ‐10.8% % growth ‐14.0% ‐2.0% ‐6.0% ‐5.0% 0.0%

Gross Profit 8,030 7,193 5,246 3,531 2,442 Gross Profit 2,252 2,131 1,860 1,699 1,631

Gross Margin (% of sales) 56.4% 50.0% 41.9% 34.5% 27.0% 42.0% Gross Margin (% of sales) 29.0% 28.0% 26.0% 25.0% 24.0%


Operating Margin (% of sales) 49.8% 41.4% 32.2% 23.6% 19.3% 33.3% Operating Margin (% of sales) 20.5% 20.5% 20.5% 20.5% 20.5%

Earnings Before Tax 6,824 (466) (9,467) (2,653) (3,144)

Income Tax Expense 2,287 (102) 630 306 (31) Forecasted Effective Tax Rate 0.0% 0.0% 0.0% 0.0% 0.0%

Effective Tax Rate 33.5% 0.0% 0.0% 0.0% 0.0% 6.7% Effective Tax Rate Adjustment 0.0% 0.0% 0.0% 0.0% 0.0%

Net Income 4,484 (538) (10,366) (2,907) (2,838) Net Income 388 419 429 442 476

Net Margin (% of sales) 31.5% ‐3.7% ‐82.7% ‐28.4% ‐31.4% ‐23.0% Net Margin (% of sales) 5.0% 5.5% 6.0% 6.5% 7.0%

Total Common Shares 999 1,001 1,022 1,165 1,165 Total Common Shares 1,210 1,258 1,307 1,358 1,411

% growth N/A 0.2% 2.1% 14.0% 0.0% 3.9% % growth 3.9% 3.9% 3.9% 3.9% 3.9%

Earnings per Share $4.49 ‐$0.54 ‐$10.14 ‐$2.50 ‐$2.44 Earnings per Share $0.32 $0.33 $0.33 $0.33 $0.34

Dividends per Share $0.51 $0.75 $0.50 $0.20 $0.14 Dividends per Share $0.06 $0.05 $0.05 $0.04 $0.04

% growth N/A 47.1% ‐33.3% ‐60.0% ‐30.0% ‐27.6% % growth ‐60.0% ‐10.0% ‐10.0% ‐10.0% ‐10.0%

Year‐end Stock Price $45.40 $34.93 $17.61 $10.81 $7.38996 997 998 999 1000 996 997 998 999 1000

2011 2012 2013 2014 2015 2016E 2017E 2018E 2019E 2020E

Cash + ST Investments 2,745 2,097 2,404 2,699 2,455 Cash + ST Investments 2,019 1,940 1,753 1,631 1,597

% of sales 19.3% 14.6% 19.2% 26.4% 27.2% 21.3% % of sales 26.0% 25.5% 24.5% 24.0% 23.5%

Total Receivables 620 675 647 626 454 Total Receivables 394 386 363 345 345

% of sales 4.4% 4.7% 5.2% 6.1% 5.0% 5.1% % of sales

Inventory 2,498 2,585 2,679 2,722 1,717 Inventory 1,592 1,560 1,466 1,393 1,393

% of sales 17.5% 18.0% 21.4% 26.6% 19.0% 20.5% % of sales

Net PPE 28,979 29,277 21,688 19,193 14,434 Net PPE 12,424 12,023 11,159 10,465 10,329

% of sales 203.6% 203.4% 173.1% 187.4% 159.9% 185.5% % of sales 160.0% 158.0% 156.0% 154.0% 152.0%

Total Assets 48,884 47,478 37,448 33,879 26,308 Total Assets 24,761 24,266 22,810 21,669 21,669

% of sales 343.4% 329.8% 298.9% 330.9% 291.4% 318.9% % of sales

Payables and Accruals 2,124 2,300 2,184 1,668 1,179 Payables and Accruals 1,206 1,182 1,111 1,056 1,056

% of sales 14.9% 16.0% 17.4% 16.3% 13.1% 15.5% % of sales

ST Debt plus LT Debt 12,998 11,948 12,699 12,465 9,653 ST Debt plus LT Debt 7,832 7,676 7,215 6,854 6,854

% of sales 91.3% 83.0% 101.4% 121.7% 106.9% 100.9% % of sales

Total Equity 25,554 24,636 16,001 12,862 9,455 Total Equity 9,473 9,436 9,442 9,446 9,446

% of sales 179.5% 171.2% 127.7% 125.6% 104.7% 141.7% % of sales 122.0% 124.0% 132.0% 139.0% 139.0%

April 18, 2016

Forecasted Income Statement Drivers

Forecasted Balance Sheet Drivers

Historical Income Statement Drivers

Historical Balance Sheet Drivers

Total Revenue Growth: The S&P is projecting total revenue decline of ‐12.35% in 2016, ‐0.31% in 2017, and ‐4.95% in 2018. The model above takes a conservative approach with forecasting total revenue decline of ‐14% in 2016, ‐2% in 2017, ‐6% in 2018, and tapering down the long term perpetual growth rate to 0% in 2020 which reflects a margin of safety. Gross Profit Margin: S&P analysts are predicting a gross margin of 30.54% in 2016, 27.32% in 2017, and 30.42% in 2018; yet the forecast takes a conservative approach. The starting point of 29% is tapered down to 24%. EBIT: Analyst at S&P predicted 21.57% operating margin in 2016, taking a conservative stand point and margin of safety the forecast assumes a constant 20.5% from 2016 to 2020. E‐Tax rate: S&P CIQ estimate a 44.17% effective tax rate in 2016 to 30% in 2020. The forecast assumes a constant 0% tax rate from 2016 to 2020.Net Income: Analyst are forecasting an increase in net income (S&P Capital IQ) from 5.47% in 2016, 7.71% in 2017, and 8.89% in 2018; however, the model reflects a more conservative forecast slowly increasing from 5% in2016 to 7% in 2020. Dividend/share: Analyst's reports states that ABX will keep their dividend constant at .08 from 2016 to 2020.There is a margin of safety and the model takes conservative approach showing a decline in DPS starting at $.06 in 2016 to $.04 in 2020. Net PPE: Due to the management plan of reducing debt to lower levels with the sale of noncore assets, the NET PP&E is expected to slowly decrease from 160% in 2016 to 152% in 2020. Total Assets: Due to the sales of assets, Total assets is expected to remain at its historical average of 318.9% but decreasing from $24,761 in 2016 to $21,669 in 2020. Debt: The forecast shows total debt of 100.9% from 2016 to 2020, but the level of debt is declining from $7,832 in 2016 to $6,854 in 2020 due to the firm's plan of reducing debt in the future years.Total equity: The forecast shows an increase in equity starting at 122% in 2016 to 139% in 2020. The increase in total equity is due to the expected decrease in sales; therefore, the level of equity is expected to remain fairly constant due no expected repurchase programs.

4. Forecasting and Valuation ABX, of 17 Copyright Robert A. Weigand, Ph.D., 2016

Barrick Gold Corporation Barrick Gold Corporation

Total Invested Capital 2011 2012 2013 2014 2015 Total Invested Capital 2016E 2017E 2018E 2019E 2020E

Cash and ST Investments 2,745 2,097 2,404 2,699 2,455 Cash and ST Investments 2,019 1,940 1,753 1,631 1,597

+ Receivables 620 675 647 626 454 + Receivable 394 386 363 345 345

+ Inventory 2,498 2,585 2,679 2,722 1,717 + Inventory 1,592 1,560 1,466 1,393 1,393

− Payables and Accruals 2,124 2,300 2,184 1,668 1,179 − Payables and Accruals 1,206 1,182 1,111 1,056 1,056

= Net Oper. Working Capital 3,739 3,057 3,546 4,379 3,447 = Net Oper. Working Capital 2,798 2,704 2,470 2,313 2,279

+ Net Property, Plant & Equip. 28,979 29,277 21,688 19,193 14,434 + Net Property, Plant & Equip. 12,424 12,023 11,159 10,465 10,329

= Total Invested Capital 32,718 32,334 25,234 23,572 17,881 = Total Invested Capital 15,222 14,727 13,629 12,778 12,608

÷ Total Common Shares 999 1,001 1,022 1,165 1,165 ÷ Total Common Shares 1,210 1,258 1,307 1,358 1,411

= Total Invested Capital/Share $32.75 $32.30 $24.69 $20.23 $15.35 = Total Invested Capital/Share $12.58 $11.71 $10.43 $9.41 $8.94


NOPAT and Free Cash Flow 2011 2012 2013 2014 2015 NOPAT and Free Cash Flow 2016E 2017E 2018E 2019E 2020E


× (1−Effective Tax Rate) 33.5% 0.0% 0.0% 0.0% 0.0% × (1−Effective Tax Rate) 0.0% 0.0% 0.0% 0.0% 0.0%

= Net Oper. Profit After Tax 4,713 5,964 4,038 2,413 1,740 = Net Oper. Profit After Tax 1,592 1,560 1,466 1,393 1,393

− ∆ Total Invested Capital N/A (384) (7,100) (1,662) (5,691) − ∆ Total Invested Capital (2,659) (495) (1,098) (851) (170)

= Free Cash Flow N/A 6,348 11,138 4,075 7,431 = Free Cash Flow 4,251 2,055 2,565 2,244 1,563

NOPAT per Share $4.72 $5.96 $3.95 $2.07 $1.49 NOPAT per Share $1.32 $1.24 $1.12 $1.03 $0.99

Free Cash Flow per Share N/A $6.34 $10.90 $3.50 $6.38 Free Cash Flow per Share $3.51 $1.63 $1.96 $1.65 $1.11

Historical Performance Forecasted Performance


FCF/Share: ABX FCF shows an downward trend from $3.51 in 2016 to $1.11 in 2020 due to decreasing EBIT and NOPAT. The decreasing free cash flow/share signals that there is less free NOPAT to pay out to investors and FCF that supports the firm's intrinsic value.

ROIC: The forecasted ROIC greater than the WACC of 8.784% illustrates that ABX is still able to create value, but the forecasted ROIC is sluggishly increasing over time from 10.5% in 2016 to 11% in 2020 signaling a relatively small increase in their ability to generate profit on investments due to a declining total invested capital.

$0

$5,000

$10,000

$15,000

$20,000

$25,000

$30,000

$35,000

2011 2012 2013 2014 2015 2016E 2017E 2018E 2019E 2020E

Total Invested Capital Net Fixed Assets

$0

$2,000

$4,000

$6,000

$8,000

$10,000

$12,000

$14,000

$16,000

2011 2012 2013 2014 2015 2016E 2017E 2018E 2019E 2020E

Total Revenue Operating Income (EBIT)

($12.00)($10.00)

($8.00)($6.00)($4.00)

($2.00)$0.00$2.00

$4.00$6.00

2011 2012 2013 2014 2015 2016E 2017E 2018E 2019E 2020E

Earnings per Share Dividends per Share

0%

10%

20%

30%

40%

50%

60%

2011 2012 2013 2014 2015 2016E 2017E 2018E 2019E 2020E


0.0%

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35.0%

40.0%

‐100%

‐80%

‐60%

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40%

2011 2012 2013 2014 2015 2016E 2017E 2018E 2019E 2020E

Net Profit Margin Effective Tax Rate (right axis)

$0

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$25,000

$30,000

$35,000

2011 2012 2013 2014 2015 2016E 2017E 2018E 2019E 2020E

Total Invested Capital Net Operating Working Capital


Barrick Gold Corporation

Cost of Capital 2015 Weight % Cost Weighted % Barrick Gold Corporation

Equity Capitalization $8,598 47.1% 13.033% 6.140%

+ Total Debt $9,653 52.9% 5.000% 2.645% Year 2016E 2017E 2018E 2019E 2020E

= Value of All Securities $18,251 100.0% Dividend Growth Rates ‐60.0% ‐10.0% ‐10.0% ‐10.0% ‐10.0%

Expected Future Dividends $0.06 $0.05 $0.05 $0.04 $0.04

Effective Tax Rate 0.00% Alternative RF Rate:

Risk‐Free Rate 1.924% 10‐year Yield: 1.924% PV Dividends 1‐4 $0.15 Dividend Yield 0.4%

Beta (default = 5‐Yr) 1.587 Alternative Beta: 5‐year Beta: 1.587 PV Perpetual Div. $0.10

Market Risk Premium 7.0% 2‐year Beta: 0.387 Intrinsic Value $0.24 If Purchased For: $13.72

CAPM Cost of Equity 13.033% Current Price $13.72 Expected Return = ‐64.2%

Weighted Average Cost of Capital: 8.784% ($13.72) $0.06 $0.05 $0.05 $0.20 $0.168.784% 8.784% 8.784% 8.784% 8.784% 8.784% 8.784% 8.784% 8.784% 8.784%


ROIC, EVA and MVA 2011 2012 2013 2014 2015 ROIC, EVA and MVA 2016E 2017E 2018E 2019E 2020E

Return on Invested Capital 14.4% 18.4% 16.0% 10.2% 9.7% Return on Invested Capital 10.5% 10.6% 10.8% 10.9% 11.0%

Economic Value‐Added 1,838 3,124 1,821 342 169 Economic Value‐Added 255 266 269 271 286

Market Valued‐Added 19,797 10,332 1,998 ‐267 ‐857 Market Valued‐Added 7,130 4,118 3,514 3,123 3,089

EVA per Share $1.84 $3.12 $1.78 $0.29 $0.15 EVA per Share $0.21 $0.21 $0.21 $0.20 $0.20

MVA per Share $19.82 $10.32 $1.96 ($0.23) ($0.74) MVA per Share $5.89 $3.27 $2.69 $2.30 $2.19

Perpetual Growth Rate: 0.0%


DCF Intrinsic Value Model 2011 2012 2013 2014 2015 DCF Intrinsic Value Model 2016E 2017E 2018E 2019E 2020E

PV of Future FCFs 39,387 36,499 28,568 27,002 21,943 PV of Future FCFs 19,620 19,289 18,419 17,792 17,792

+ Cash and ST Investments 2,745 2,097 2,404 2,699 2,455 + Cash and ST Investments 2,019 1,940 1,753 1,631 1,597

= Total Intrinsic Firm Value 42,132 38,596 30,972 29,701 24,398 = Total Intrinsic Firm Value 21,639 21,229 20,171 19,423 19,389

− Total Debt 12,998 11,948 12,699 12,465 9,653 − Total Debt 7,832 7,676 7,215 6,854 6,854

= Intrinsic Value of Equity 29,134 26,648 18,273 17,236 14,745 = Intrinsic Value of Equity 13,807 13,554 12,956 12,569 12,535

÷ Total Common Shares 999 1,001 1,022 1,165 1,165 ÷ Total Common Shares 1,210 1,258 1,307 1,358 1,411

= Per Share Intrinsic Value $29.16 $26.62 $17.88 $14.80 $12.66 = Per Share Intrinsic Value $11.41 $10.78 $9.92 $9.26 $8.89

vs. Year‐End Stock Price $45.40 $34.93 $17.61 $10.81 $7.38 vs. Most Recent Stock Price $13.72

Over (Under) Valuation/Share $16.23 $8.31 ($0.27) ($3.98) ($5.28) Over (Under) Valuation/Share $2.31

% Over (Under) Valued 55.7% 31.2% ‐1.5% ‐26.9% ‐41.7% % Over (Under) Valued 20.3%



Dividend Discount Valuation Model

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EVA MVA (right axis)

EVA/Share: EVA per share is forecasted to decrease from $0.21 in 2016 to $0.20 in 2016 signaling less economic profit is expected to be created on a per share basis.Intrinsic Value: Intrinsic value over the forecasted period appears to be overvalued by 20.3%.MVA/Share: MVA per share decreases to $5.89 in 2016 expressing a decrease in the value of capital contributions to the firm by shareholders. Genuine value creation increases in the forecasted model from ‐$0.74 in 2015 to $5.89 in 2016, but decreases to $2.19 by 2020.Conclusion: ABX's MVA per share decrease expresses how genuine value creation is reduced from $5.89 in 2016 to $2.19 in 2020. With Total Invested Capital slowing down, ROIC shows a small increase from 10.5% in 2016 to 11% in 2020 due to NOPAT growing faster than total invested capital. ABX forecasted ROIC‐WACC spread expands from 2016 to 2020 showing asmall improvement in their ability to generate profit on its investments from 2016 to 2020, while the stock price appears to be overvalued in 2016 by 20.3%.

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NOPAT per Share Free Cash Flow per Share



Relative Valuation 2011 2012 2013 2014 2015 Relative Valuation 2016E 2017E 2018E 2019E 2020E

Price to Earnings 10.1 ‐65.0 ‐1.7 ‐4.3 ‐3.0 Price to Earnings 42.8 32.4 30.2 28.5 26.4

Price to Free Cash Flow N/A 5.5 1.6 3.1 1.2 Price to Free Cash Flow 3.9 6.6 5.1 5.6 8.0

Price to Sales 3.2 2.4 1.4 1.2 1.0 Price to Sales 2.1 1.8 1.8 1.8 1.8

Price to Book 0.9 0.7 0.5 0.4 0.3 Price to Book 0.7 0.6 0.6 0.6 0.6

Earnings Yield 9.9% ‐1.5% ‐57.6% ‐23.1% ‐33.0% Earnings Yield 2.3% 3.1% 3.3% 3.5% 3.8%

Dividend Yield 1.1% 2.1% 2.8% 1.8% 1.9% Dividend Yield 0.4% 0.5% 0.5% 0.4% 0.4%


P/E ratio: ABX's 42.8 P/E ratio in 2016 is above the reasonable range of 12 to 18, and stays above the reasonable range from 2017 to 2020. ABX's forecasted 2016 P/E Ratio can be a warning sign of volatility when there is no faster expected future growth for the firm.

Dividend yield: ABX's dividend yield remains fairly constant and below our 2% benchmark from 2016 to 2020, which is not good based on our preference for strong dividend payers.

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ROIC WACC

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Year-End/Most Recent Stock Price Per Share Intrinsic Value

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Price to Earnings Price to Free Cash Flow

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Price to Sales Price to Book (right axis)


tsx:abx barrick gold corporation sector: materials sell

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